New regulations needed to boost regional cooperation: analysts

Innovation and ingenuity will be needed to bring financial-sector cooperation in the Guangdong-Hong Kong-Macao Greater Bay Area to a whole new level, analysts said on Tuesday.

China released on Monday its overall blueprint for the development of the area, aiming to build a global economic and technological powerhouse in the Pearl River Delta that could be on par with bay areas in New York and San Francisco.

The document also focused on financial cooperation in the region, mentioning "finance" 62 times. The plan features the building of financial hubs in the region, development of characteristic financing businesses and greater financial-sector connectivity.

Analysts said there is strong demand as well as immense scope for financial cooperation among Hong Kong and cities on the Chinese mainland. Such cooperation will serve as a vital link for the area, which consists of 11 cities and accounts for about 12 percent of China's total GDP.

E Zhihuan, chief economist at Bank of China (Hong Kong), said that financial cooperation has existed for a long time with significant results.

"In the next step, financial connectivity will be lifted to a new level. The yuan's cross-border flows will become easier provided they are in compliance with the law, and residents in Hong Kong and Macao will enjoy new convenience in retail finance services such as opening accounts and payment of daily expenses," E told the Global Times on Tuesday.

The current financial norms will have to be replaced with new ones to cope with the situation of "one country, two systems," and three customs territories so that financial markets could allocate production factors without hindrance, according to E.

In all these aspects, ingenuity and innovation will be needed, E said.

Striking the correct balance between boosting financial-sector vitality and abiding by China's capital account management regulations will be the main test for reformers, E said.

The plan released on Monday said the use of the yuan will be gradually expanded in the bay area, and it will allow more flexibility for Chinese mainland and Hong Kong residents to invest in projects across the border. Cross-border deals involving mutual funds and insurance will be promoted.

"The ultimate goal of financial sector cooperation in the bay area is to make it financially inclusive, innovative and the leading area for financial services in the world through collaboration between the 11 cities," said Musheer Ahmed, general manager with Fintech Association of Hong Kong.

"It is good to see innovation, talent, and cross-border financial technologies (fintech) being defined across various elements. The blueprint provides a direction and path for the city governments to work on and collaborate," Ahmed told the Global Times, noting that the Fintech Association of Hong Kong will soon release a report on fintech in the Greater Bay Area and next steps for the industry following the blueprint.

Echoing E, Ahmed said stakeholders need to work to make sure that there is easy movement of goods, people and services across the different regulatory and legal environments. "This is important to ensure the bay area functions as a single unit and not as separate entities."

According to media reports, as of the end of 2017, banking assets in the Greater Bay Area totaled $7 trillion and deposits reached $4.7 trillion. Both figures surpassed those of the bay areas in New York and San Francisco. In 2017, the area also registered $128 billion in insurance premiums, accounting for nearly one-quarter of the total for the Chinese mainland and Hong Kong.

Liang Haiming, chairman of the China Silk Road iValley Research Institute, said new financing channels in the region could be modeled after the Silicon Valley Bank, which helped companies like Facebook and Twitter during their infancy.

Such platforms will address the acute financing bottleneck for technology start-ups in the area with precision, and at the same time provide a venue for foreign capital that wants to bet on China's high-tech future, Liang told the Global Times.